ASX Plunges in Worst Day Since GFC

Australian shares lost more than $140 billion in the worst day of trade since the global financial crisis with the fallout from COVID-19 and plunging oil prices hitting the market.

The ASX 200 tumbled 455.6 points, 7.3 per cent—from 6216.20 at the previous close to 5,760.6 by the end of the day.

Australian real estate investment trusts dropped 4.78 per cent to 1,507.3, while the Australian dollar held steady at around 65 US cents.

Overnight, Wall Street experienced its worst day since 2008 with stocks plunging nearly 8 per cent—forcing a 15-minute halt in trade minutes after the opening bell.

JP Morgan chief economist Sally Auld said the macroeconomic environment was likely to get worse before it gets better.

“Even though the infection rate [in China] is slowing and we are getting evidence that Chinese factories are coming online, the geographic spread of the virus is getting larger.

Speaking to Radio National Drive on Monday, Auld said that the geographic spread of the virus has forced economists to revise down growth forecasts.

“And that process doesn't really end until we get to a point where authorities are comfortable that infection rates have peaked and they can wind back containment measures.”

In the long run A-REITs are expected to fare better than the larger market, according to a note by JP Morgan analysts Richard Jones, Ben Brayshaw and Krzysztof Kaczmarek: Stress-testing for COVID-19.

“As a general rule, we believe the A-REITs are well-positioned to deal with the uncertainty as the majority have low gearing, ample liquidity, secure income and quality assets,” they wrote.

The analysts said that the virus will impact all property types while tenant demand will taper as companies defer occupational decisions during the period of uncertainty.

“We believe retail sales will be hit by falling tourism, corporate travel restrictions and declining consumer sentiment; this could see a further rise in administrations.

“Landlords may have to provide rent relief. Falling consumer sentiment may stall the residential recovery as potential purchasers begin to worry about job security.”

Elsewhere, banks were hard hit—Westpac was down 8.57 per cent, ANZ Bank and NAB dropped 8.45 per cent and Commonwealth Bank was down 6.47 per cent.

Commsec markets analyst James Tao said the Australian market suffered one of the worst daily declines in more than a decade.

“Global markets, which have been concerned over the coronavirus outbreak and the potential fallout for economies around the world, are now dealing with another issue in plunging oil prices,” Tao said.

“Crude prices slumped 30 per cent as major oil producing nations were unable to agree on production cuts.

“Saudi Arabia and Russia are now expected to even ramp up production which will add to the excess supply in the market considering demand expectations have fallen on the coronavirus outbreak.”

Tao said no sector was escaping the sell-off, with only a handful of gold stocks in positive territory as investors leaned towards safe havens.